The financial authorities will limit project financing (PF) loans in the mutual finance sector, which includes credit unions, agricultural cooperatives, fisheries cooperatives, and forest cooperatives, to 20% of total loans. Additionally, the combined limit for loans in the real estate and construction sectors, along with real estate PF loans, will be capped at 50% of total loans.
The Financial Services Commission announced on June 17 that it had approved revisions to the 'Mutual Finance Supervision Regulations' during its regular meeting. This amendment is a follow-up to the 'Mutual Finance System Improvement Plan' announced in December 2025 and will take effect on the date of the announcement. However, the PF loan limit regulation will be implemented starting April 1, 2027, to allow cooperatives time to prepare.
The criteria for estimating the expected recovery value of non-performing loans will also be strengthened. In the future, the exceptions for using the final collateral appraisal value when estimating the expected recovery value of 'substandard loans' will be reduced. Non-performing real estate PF loans classified as substandard for an extended period will no longer be able to use the final collateral appraisal value in their recovery value estimation. This measure aims to prevent the overestimation of non-performing loan values and encourage the accumulation of provisions that align with risk.
The soundness standards for mutual finance cooperatives will also be raised. The ratio of net capital to total assets will be increased to over 4%. The recommended financial improvement standard for credit unions will gradually rise to 4% by 2031, with a required standard of 0%.
The management guidance ratio for the National Federation of Mutual Finance Cooperatives will also be raised to 7%, aligning it with savings banks. The Financial Services Commission and the Financial Supervisory Service plan to continue measures to enhance the soundness and reliability of the mutual finance sector while also developing strategies to restore its identity as a regional and community financial institution.
* This article has been translated by AI.
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